Recent Market Volatility

Mar 6, 2020 - Firm News by

From an all-time highs, to all-time low, it’s been a wild couple of weeks in the stock markets. In this week’s blog, CCM’s Head of Equities, Andrew Cowen, shares his thoughts on the recent market volatility.   

On February 19th, the S&P 500 closed at a record high, showing that the markets were not as concerned about the effects of the Coronavirus. However, its low point was seen just nine days later when the S&P 500 experienced its fastest-ever decline1. Other major stock indexes such as The Dow Jones Industrial and Nasdaq Composite also faced major declines.

“The main surprise in last week’s market was the weakness in defensive securities, particularly those with duration, such as investment grade preferred shares and Real Estate Investment Trust (REIT) common shares. Even if we took risk spread widening into account, the compression of treasury yields should have made those securities better relative investments to the broader, more economically exposed markets. But instead, they sold off worse.”

So how did that impact CCM’s strategies and how will the market look going forward?

“This dynamic led us to increase our exposure to our favorite assets of that ilk without changing our overall market exposure. High quality duration assets sold off very hard despite the treasury rally and in a world of 1 percent rates, we expect that moving forward, those assets will do extremely well, particularly those relatively immune to economic activity.”

 

1 https://www.wsj.com/articles/the-week-that-wiped-3-4-trillion-off-the-stock-market-11582891223

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